Cashing in on 'dumping'

IF WE can't compete, then the game must be unfair, or, even worse, someone, probably a foreigner, is cheating.

So goes the childlike argument by too many American companies.

Complaining to the U.S. government about the unfairness of foreigners has become the single most popular way that American industry seeks protection from imports. And Congress apparently listening as it prepares to implement the Uruguay Round of the General Agreement on Tariffs and Trade. Listening to congressional testimony, one would have to conclude that the major American GATT issue is to make certain that our ability to wield the anti-dumping club on foreign exporters remains unimpeded.

Dumping occurs when a foreign company charges a lower price for a product in an export market that in its home market. When NTC the Department of Commerce finds a foreign company guilty of dumping, and the U.S. International Trade Commission also concludes that the dumped products injured competing American companies, penalty tariffs are imposed on the imports equal to the alleged dumping margin.

Charges of dumping have become a virtual growth industry for uncompetitive American companies and their attorneys. But what they deem "dumping" can be nothing more than pricing differently in different markets. Prices can vary from market to market for all sorts of good economic reasons, fluctuating foreign-exchange rates among them. The complainers' rhetoric, however, connotes a moral deficiency and sets the tone and characterizes the nature of any discussion of dumping.

Demagoguery, however, is only part of this witch's brew of trade policy. What is even more absurd is the way anti-dumping rules are implemented. The methods used to calculate production costs and "dumping margins" are heavily biased in favor of a U.S.-based petitioner.

If a foreign exporter fails to respond quickly to a 100-page English-language questionnaire, Department of Commerce bureaucrats are happy to turn to the alternative "best information available" -- in other words, the petitioning U.S. industry's inflated and, more often than not, unchallenged charges.

The department can demand an infinite amount of information from an exporter; any refusal to comply is taken as a confession of guilt, after which the highest possible dumping margin is imposed.

U.S. trade policy separates anti-dumping rules from their only conceivable economic rationale: to stop predatory pricing. In theory, the foreign predator uses profits earned in its protected, high-priced market to finance exports at a below-cost price, eventually driving competition from the market, at which point the predator hopes to reap its unjustly earned rewards. But in reality, policing predatory actions is simply not what U.S anti-dumping regulations do.

It is probably safe to say that in not one of the hundreds of affirmative anti-dumping determinations over the past 20 years was predatory pricing remotely present. This is hardly a secret, because dumping laws are often used for "protecting domestic industries from foreign competition," as the Council of Economic Advisers concluded in its 1994 report to the president.

But what goes around comes around. In more and more developing countries, U.S. anti-dumping laws are being imitated and then used to bushwhack American exporters. We are coming full circle.